Nancy Thomas and Calvin Funk authored an article for The Banking Law Journal, discussing the proposed unfair, deceptive, and abusive acts and practices regulations issued by California regulators affecting providers of commercial financing to small businesses and other entities.
"Throughout the Proposed Regulations, the DFPI [California Department of Financial Protection and Innovation] conflates consumer and commercial financing," the authors wrote. "In the Initial Statement of Reasons, the DFPI acknowledges that the legislature was focused on creating 'robust consumer protections' and asserts the anticipated benefits of the Proposed Regulations include 'an increase in consumer welfare.' Despite the DFPI's 'Covered Consumer' terminology, though, the Proposed Regulations concern financing to businesses, nonprofits and family farms, not consumers."
They added: "The DFPI copies definitions of UDAAP [unfair, deceptive and abusive acts and practices] verbatim from Dodd-Frank Title X, which also concerns consumer financial products and services. The DFPI tries to connect lending to consumers with lending to organizations by claiming these organizations are 'managed and operated by individuals and consumers of financial products and services just like individual consumers.' This assertion is not backed up by any analysis or research regarding the thresholds specified in the definition of small businesses in a statutory provision unrelated to commercial lending. It also skips over the corporate form entirely as well as the legal and practical distinctions between business organizations and the individuals who own those organizations."
Read the full article.
Originally published by The Banking Law Journal
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